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tv   HHS Secretary Azar on Health Care Policy  CSPAN  December 8, 2018 4:22am-4:56am EST

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on real america, a 1974 conversation with democratic representatives martha griffith of michigan. this weekend, on american history tv, on c-span 3. >> when the new congress takes office in january, it will have the youngest most diverse, freshman class in recent history. new congress, new leaders. watch this live on c-span starting january 3. >> health and human services secretary alice a czar headed a conference earlier this week. next, we show you three and half hours from this conference hosted by the american enterprise institute. we begin with secretary a czar's remarks. --
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>> good afternoon. i think we are ready to get started again, thank you for being here and thanks to those watching on the live stream and obviously you will watch the video after this event i'm the director of economic policy studies here. it's a pleasure to be here with you today for this important discussion of the policy barriers to real choice and competition in the healthcare system and promising opportunity to overcome these barriers. i am especially pleased and honored the secretary of health and human services is with us today. i will introduce the secretary in a moment but before i do, a brief reminder of the run of show, the secretary will speak from the podium for 15-20 minutes after which he and my colleague will have a conversation on the stage and following that discussion we will open this up to some
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questions from you. alex azar was sworn in as president trumps secretary of health and human services in 2018. this is his second tour of duty at the apartment -- department. he has spent his career working in senior healthcare leadership roles in both the public and private sectors. he is a friend of aei and he spoke on the administration's agenda for prescription drug pricing. several of my former colleagues are now his colleagues in the trump administration including the fda commissioner. it is a pleasure welcome him here and to introduce to you the 24th secretary of health and human services alex cesar. >> thank you very much michael and thank you for the introduction and good afternoon to everyone i want to talk
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about the national passing of president bush and we should remember his exceptional devoted service to our country. i am grateful for this impressive gathering of thinkers on this important topic. my current job, i always feel a little place when entering. it's not an easy job. you have to explain how your bringing principles of limited government and fiscal -- and fiscal conservatism to a one- point trillion dollar -- $1.2 trillion agency. china, germany, japan, and france, i should say this is the only one comp titian where i'm okay losing to the french. it is appropriate to be here because throughout this history, the institution has been devoted to thinking about
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how to apply free-market principles to the practical working government. the scholars think not just of limiting the harms of government intervention but how government could be reformed to deliver better results. the president, martha brooks put this -- marco brooks. declaring piece on the safety net. i hope this is how you all think of this. what would we fight back with? our actuaries and calculators. of course he's not suggesting we be content with the safety net we have, many of you already know better that complacency is really not arthur book this thing -- arthur brooks is playing. thinking about how to reform the safety net and all federal health care programs so they could work for those that they serve. we need to have a more ambitious vision than just that. we as conservatives want a
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better run safety net and better healthcare for all americans. the goal here is clear. we want affordable and quality healthcare for every american. delivering this, it requires a vision more comprehensive and more ambitious than previous efforts to healthcare reform. affordable healthcare demands thinking of every element of healthcare, not just health insurance but healthcare services. or a health workforce and particular elements of healthcare prescription like drugs. the report reflects the scope of reforms that might be necessary. looking across the healthcare system we delivered reforms that could work not making insurance more affordable while neglecting the cost to run maligned care, we are trying to bring down the cost of care without providing the right financial incentives to accomplish that. the reform should rely to the extent possible on competition within the private sector as
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brian blais mentioned this morning, the private sector is the source of the innovation, the only way in any part of our economy to drive costs down while improving quality. patient should be at this center and the freedom to make choices that work for them. innovating rather than assuming the federal government knows best. and finally we need to deliver care in an affordable and fiscally sustainable way while maintaining a safety net for the needy. these ideas are a radical departure from -- for the way the american healthcare system has worked for so long, the government has been the dominant factor in the financing and delivery of our healthcare. as many know in fact, even as
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we pride ourselves on having a more private sector driven system compared to other nations, america's government healthcare spending per capita is higher than almost any other government on earth. partly because patients have been removed from the decision- making. insulated by third-party payment systems from any incentives which could drive down costs of care. the third party payment systems, especially government programs pay for procedures rather than seeking value than paying for health and outcomes. which has led to the system we have today were each year, we spend a staggering $28,000 per family on healthcare. and yet, many americans still do not have access to the care that they need. the most recent attempt to reform healthcare did not directly attack these flaws but rather expanded and reinforced the system that we have today and put new regulations on health insurance and provided new subsidies and dramatically expended the government's role in medicaid. the main thrust of the aca was to push $1.6 trillion over the next decade with the new spending in subsidies into these -- into the status quo reinforcing what already was
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not working. the rest of the system remained in stasis, 28 million americans are uninsured and the out-of- pocket costs they pay are higher than ever. more than 200 million americans received health insurance is their employer or medicare are still paying too much for the underlying care, even americans who have insurance through the aca have not seen the problems solved. their insurance costs are high because the aca destabilized insurance markets and also because the healthcare services have been so expensive in the first place. addressing the situation will involve substantial reforms to ensure the regulations. earlier today, brian ran to the details of our expansion of the short term limited duration insurance and association health plan and the proposal to expand health reimbursement accounts. our healthcare vision requires delivering these new options because consumers have to be
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able to finance their healthcare in a way that works for them. going about reforming insurance, we have got to do this in a way that will do -- that will support competition and choice in healthcare services as well. one example of what this looks like, last week, cms laid out new ideas for states to pursue publishing models for state relief and empowerment waivers under section 13-32 of the aca. under these waivers, the states had flexibility to modify the structure of the current premium tax credit system to determine what plans were eligible for tax credit and undertaking steps to protect high cost for consumers but the most into string -- interesting model is that that we proposed using the aca tax credits to fund new consumer driven safety accounts to pay for premiums for out-of-pocket costs which is how you get beyond the traditional model of insurance to bring real competition to healthcare to protect them from
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catastrophic healthcare costs without insulating them from being price conscience consumers. the solution here comes from the private sector where many employers have paired lowell -- lower costs with health saving accounts. they work best when the hsa is funded and they are insulated further risk of paying healthcare costs out-of-pocket but ensure the dollars that you are charged to spend. it happens that employers like the government have ran to the limits for what you could get from just tweaking the healthcare financing. the article just this week in the wall street journal reported employers were finding limitations to the use of hsa's and high deductibles and the tools could help with necessary spending -- unnecessary spending but the incentive
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alone won't build the market where patients are truly in charge and there healthcare is competitive like other sectors of the economy. in fact, according to the healthcare cost institute from 2012-2016, americans utilization of healthcare services remained flat and healthcare spending rose only because prices rose. this is a system which needs fundamental reform not just tweaks in financing. the drive down prices, we need to think of driving more competition but unfortunately the single biggest healthcare spender is mine which pays prices for procedures rather than seeking out value to driving competition. remarkably, some have proposed performing healthcare -- affirming healthcare system with government driven coverage to ensure all americans expanding government footprint with sideline consumers and the private sector. it repeats the mistakes of the affordable care act by simply assuming more financing which means better healthcare. right now the way we finance a lot of healthcare, it actually impedes competition rather than promotes it. for instance there is a huge
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differential between what medicare pays for services at hospital owned facilities versus outpatient centers which has driven hospitals to snap up smaller competitors who cannot say no to the possibility of a new policy that will increase the competition they get from -- the compensation they get from the government. fixing the situation has been talked about for years by administration in both parties and yet, this administration is the one that finally is bold enough to do this. just a limited proposal that we put forth are estimated to save $380 million next year alone while restoring a more level playing field for providers. we have federal regulations that impede competitions as well. smaller healthcare providers will never be able to compete with larger ones unless they could band together to create competence of steps of service but today, current interpretation of laws like the stark law and the kickback statute make this almost
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impossible to do which is why we are in the middle of a unprecedented effort to consider and reform the way the laws affect tariff coordination. i would like to be clear, nothing we do on these rules will reagan -- will weaken fraud protection. states could also play a major role, toward the competition report it lays out, states impose a regulation which drives up the cost to provide care, these include certificate of needs raw, -- certificate of needs law. a robust state about the regulations and what they look like but personally, i find it hard to fathom how any healthcare consumer needs protection from a nurse practitioner writing a prescription or a mri facility opening up down the street. moving toward paying for value, we believe the need for micromanaging providers at the
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federal and state level will be dramatically diminished. if a provider is willing to accept the risk for the outcomes they deliver, then we don't need to micromanage how they do this. it just works once provider is incentivized to deliver the outcome delivered to the patient, not the paperwork that matters to the government. the final area i would like to address is the broken system of prescription drug pricing where the results of any payment system is as perverse as anywhere. one fundamental principle of economics and market is supposed to be that, if you cut your price, more people will purchase your products. you don't need to be kevin hassett or michael string to know that and yet, it's not by and large how the drug prices working america. is a company lowers its price for any given drug, the drug could actually become less desirable vis-@-vis, it's competition. obviously consumers would not look at it like this but they don't decide which drugs are available and at what cost
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which is decided by insurers and employers and pharmacy benefit managers. they are all paid at a percentage of the drugs list price and the drugs price drops, many patients will save but those actually negotiating for the patient's may lose money. here we have another example of how -- for how this is driving up the cost of care itself. the only way we ended up with a huge gap between drugs and list prices and the net prices negotiated is because there's a third party in between the consumer and its product just as there is in so much as the healthcare. ideally the patient should be at the center of the system but in many parts the healthcare needs to support patients with navigators to make the right decisions and in these cases like a drug pricing, we need decision-makers that are driven by different and opposite incentives. resetting the system, rewriting the rules of the road so they
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could compete on price is necessary to holding out a pricing system which meets the principles that i have laid out. some parts of the drug pricing system do work well because the incentives are largely aligned in the consumers are in charge which includes medicare part b which harvested the private sector and helped consumers. it's actually much more fiscally sustainable than ever expected. but there is opportunity for improvement there. we recently proposed flexibility for plans to negotiated within drugs which is what is noted as protective classes, six particular types of drugs where access is specially -- is especially reported. it was intended to be temporary which requires plans to cover all drugs in these classes. it undermined the plan ability for negotiation of lower prices especially as more drugs in these classes were ahead of the market and the private sector plans developed tools for pitting them against each other. right now, part d gets the average of just 6% on these
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drugs while the private sector gets discounts of 20-30%. drug companies are using these protective classes to take advantage of our seniors. and what we have proposed is to allow them to use the same innovations that are already in use by the private sector and these tools earn competition among prescription drugs because those under patent have therapy competitors. it is worth noting how the proposal for the protective class -- classes differs from other proposals in the same area. in 2014, the previous administration proposed outright elimination of two protective classes in this approach underrated the importance of bringing private sector negotiation tools to all protective classes and disregarded the fact that part d because of it consumer driven program, had built in protections. it pertains the ultimate consumer protection. exit rights, and a healthy market like part d, the moral
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phrase, if you don't like your plan, you do not have to keep it. we don't need to limit private- sector innovation with overly burdensome regulations with patients who could simply pick another plan with their own dollars. the same philosophy could be applied to many other input in the healthcare system. the historic choice and competition report shows how ambitiously we are willing to think, looking at every possible factor from insurance to workforce that could drive up the healthcare costs and examine every possible regulation that might be driving up prices that consumers pay. one belief that separates our efforts from past reform is the recognition that affordable healthcare for every american does mean affordable insurance premiums. but most of all, this means affordable healthcare prices. and under this is administration the reform will
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be focused on not just coming up away -- with the way for better finances. the president is not interested in tinkering with the edges of the system. he noses -- he knows that there's a burden imposed today and he wants reform. thank you for your time today and i'm looking forward to the discussion. thank you. >> thank you very much mr. secretary. you've answered some of my questions. someone may have given them to you in advance. when we say we will have a fire site -- [ laughter ] >> absolutely. >> we do this literally. [ laughter ] >> there we go. >> that was a good one i had not seen it before. >> well i'm told since it was not flavored he added to it. these could probably stay on the market. >> well this has been a partial problem for me. here we go. all right, well you get the idea.
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you are very fond of voting for president ronald reagan on the number of occasions along the lines of -- there were no easy answers but there were no simple ones. you said during his inaugural address, in the present crisis, government is not the solution to the problem, government is the problem, how much so in healthcare? you have a lot of problems in front of you and just standing back it sounds like that's not the solution either. >> quoting one of the important lessons i picked up oddly of all places at yale law school. i had a property professor who i loved so much, i never went to school -- of went to law school thinking properly of zoning but he's to say you see sections of manhattan that had
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burned down buildings and land not put at its best use, ask yourself a question how is the government involved here? when you see things not operating the way the classical economists think they should work or markets with competition, ask yourself, does the government have it's hand here? if healthcare is as you mentioned, it's there, with medicare, you know, we had a system in 1965, started paying reasonable cost reimbursement, okay? you got more costs and you save reasonable cost reimbursement and guess what happens, prices go up your give me the bill and i pay it but in the 80s the president came in and started moving the schedule based on the system, inflation adjusted
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with all complex formulas but still paying for procedures with sickness and being in different outcome. so we are trying to change this system now which is what the secretary got us on this journey on. >> talking about site neutral. could we really be totally neutral when government is paying for healthcare? you are either paying better or paying worse. >> wellsite neutrality certainly is a drive. it is a challenge. this is why i favor mechanisms of private sector competition because, i really do not think that myself, sitting around the conference table with my colleagues is the way to determine prices or to look for market proxies or to use market actors to compete which is why a reference in my speech, medicare advantage is so ingenious. here is this amount of money with this competition for better
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instructions and you could choose to pick your plan or someone else's and there's the tremendous success delivering satisfaction both in the medicare advantage and the more that we could use these processes to determine rates and reimbursements and moves to value, this is how we should be doing it. >> there were a lot of observations and criticisms for what other governments as well as other actors had been doing in this report on close competition. what is the balance of being able to inform and incentivize but not necessarily say once again in washington, we know best? >> this is a challenge, particularly in the part of our program called fee for service. with medicare fee for service it's us running a government program. in a crowd like this we have to call it out. we are running a government insured system and the rate system, it's being set around the conference system which is why the extent to which we could lick to medicare advantage as examples of how things kind of should work, the better. we will have a interesting discussion over the next 5-10 years because medicare advantage has always been a smaller portion of medicare
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then medicare fee for service is dominated which is now changing. for up to i think, a third of beneficiaries are in medicare advantage. if it keeps growing at this rate with seniors who age in or are used to having a comprehensive medicare like advantage rather than the different 1960s fee for service benefit, they choose that kind of plan, there's a day where we will have majority medicare advantage where it is the dominant part of the medicare system and will have to rethink this whole mental frame where fee-for-service leads to medicare advantage to follow. maybe we need to think of medicare advantage innovations. >> we have no shortage of rhetoric and some efforts with information and transparency, thinking of a conference and we could divvy up these steps but we had not ignited this and it
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was barely taken off, was there problems with white demand or maybe not asking the right questions? which gets people interested in saying i could do something with this? >> there is a bit of a supply issue and we are working hard to advance that through cms we are putting in more information with provider reimbursement that's now available, the rates hospitals that doctors are getting, the internet requires -- the requirements. working on ways to bring more transparency to pharmaceutical pricing. the challenge though comes on the demand side. >> do you care? if you've got a set $25 co-pay, regardless of where you are buying this service, do you care? >> the answer is no. that's why we kind of think more fundamentally about how we have access to healthcare and how this could reinforce
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incentives toward a value driven system as i mentioned in my remarks. >> you talked about building market. is this a redecoration or is this a renovation? or is this a real tear down? or a demolition of site preparation? you got a lot in front of you, what actually goes to building without getting people to worried about everything being caught at once? >> this is a significant issue. listen, we always like to talk about us having in the united states a free market system and yes there were major elements that were quite free but that's -- this doesn't necessarily make them competitive. we don't have a competitive market for pharmaceuticals in the sense that you do not have a pricing mechanism as i said in my remarks, the decreased price you get more products sold so you have some real distortions in this system, largely driven
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by government behavior. so i'm is limited as an advocate as anyone could be but when the government has set the rules and the system has oriented that set of rules, it takes the government to change those rules of the road to help facilitate a competitive marketplace which might seem like big government fees or it may seem disruptive but it will seem disruptive because you have very significant and trust financial interests who are not at all pleased with disruptions that have been brought to the healthcare system. but we aren't going to get anywhere if we do not. i find it remarkable that people are so vested in the status quo that they don't stop complaining about this. they are willing to help be part of changing it. >> we have a tight schedule and we could take a couple of questions from the audience. sy azar. sy i'm rosemary gibson i started my career here a long time ago and were wrote a book on our
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dependence on china for medicine particularly generics. i would like to talk about competition in that market its driving a lot of manufacturing to china getting him in its initiative to become a global primacy to the world so what it means a lot of men and women now are dependent on the adversary for their antibiotics and blood pressure medicines and we know there've been some quality issues recently. who is in charge of this beyond the fda and beyond the defense department certainly they have a stake in this because it is a security when you have to depend on the adversary is for essential medicines. what is in the government to consider some of the medicines as strategic assets is anyone thinking about this and is there someone in your office to follow about this, and is or someone in your office that can follow up with this extraordinary
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issue that hasn't gotten much attention? >> we certainly do consider these issues and we look at medicine supplies and the strategic and national security elements of those so that is your largely driven by the assistant secretary for preparedness in coordination with the fda both on the supply chain as well is on the supply of products. we do look at that. in terms of the generic market, the generic market is actually one of the more competitive indeed almost hypercompetitive aspects of our system. this has led to some supply dislocations because of what we have found is, you get that immediate competition and decline and price comes in and you will have maybe 14, 15 competitors ahead of market segmentation's ahead of the retail channel sorts out. but over time, they find that the cost of production and the reimbursement levels can't survive to produce and make a
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run of it. and you get a sorting out over the years and you get to a later point where it starts creeping up where you have maybe only one or to suppliers remaining. and that is an issue we have asked about in our blueprint is, are we actually in some standpoint under compensating them as to where the generic get made or enduring competition. so many of the pricing issues have become quite famous and are not branded pharmaceutics, they are actually generic products where there has been this supply dislocation, either because you and bert reimbursements are sorted out and only one marketeer remains or, we at fda have been doing our job of inspecting and we pull a manufacturer off-line because they were not able to meet our quality standards. >> let's see if we get one more in. mark? this is inside of the one minute bubble. refer to your remarks of
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medicare advantage and if it works as well as it does and i think it does work very well and has even greater potential to be a leader, what about the idea of medicare buy-in? if people think they get better values in medicare advantage approach, from the pure private insurance and they might buy into it? >> the challenge with this notion of medicare buy-in is effectively one of the many iterations of this medicare for all debate that is going on. it hinges on the notion of paying all providers what medicare pays doc others and hospitals. medicare under pays providers right now compared to the competitive marketplace. if you force the market, if you basically allow this buy-in or medicare for all access to those lower medicare rates, you will crowd out and calls the complete disruption of the employer-sponsored health insurance system in the united
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states. 174 million americans insured by the employers and if you create an option where you get socialist price lower compensation, access to compensation for doctors and hospitals, through that there is simply no way private sector insurance could compete against that. and it would be completely destructive of hospitals, doctors and quality medicine. you see it in other places of the world where the better doctors and hospitals opt out and they say i'm not part of that system. and will take it and seniors will suffer because seniors don't have access. so, it takes a bit of a stream here, it seems especially appealing until you get into the mechanics of why does one want to do it and it brings the whole system crashing down and not in a good destructive way. >> will want to think everyone today for giving us a well- developed and energetic discussion. if you could please remain in
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your seat while secretary azar leaves the building, thanks everyone. next, a panel looks at how healthcare costs in the us could be reduced. >> good morning everyone, welcome to the american enterprise institute our conference today is healthcare that matters, real choices for real competition. i am tom miller, cheese entertainment critic here, here's what we going to do today. yesterday b trump administration released its multi-departmental report on reforming america's healthcare systems through choice

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